Economists had expected a cut of somewhere between half a percentage point and 1 percentage point. It is arguably the first time in the current "easing" cycle that Reserve Bank Governor Alan Bollard has slightly surprised the market on the low side. Previously he has tended to make bigger cuts than expected.

Today's lighter cut, after a 150 basis point cut in January, followed the Reserve Bank of Australia's decision last week to hold that country's rates at 3.25 per cent.

But today's move will still help homeowners. According to Reserve Bank figures dating back to 1964 our mortgage rates are now approaching historic lows.

The average floating rate offered by banks was 5.7 percent during three months of 1964 and has not fallen as low since, having risen steadily until 1987 where they peaked at 20.5 percent. The next closest low period was in 1999 in the aftermath of the Asian Financial Crisis, where the floating rate dipped to 6.4 percent.

ASB economist Chris Tennent-Brown says if the OCR falls to 2 percent by mid-year as his bank is predicting, then the floating rate would be expected to drop below 5 percent.

Bloody hell - just when I finally have savings in the bank the interest falls through the floor. My monthly interest pretty much halved between January and February

The irony is we've all been told to save and now saving is becoming a fairly fruitless exercise. It must be rough on retirees who were relying on interest to prop up their lifestyle.

Suits me, my 5 year rate of 7.6% comes off fixed on Monday! I like stability so am going to re-fix for another 5 years at hopefully 6% (maybe just under) and am borrowing more to finish off the house, and still will be decreasing the length of the mortgage!!! Yay!!!

phunk wrote:Ima gonna save a chunk of cash when my current fixed rate expires. Pity its a couple of months away..

We've always been too slack to get around to fixing part of the mortgage - always had floating. There was a short period where we paid more in interest when it spiked, but for a part of that we were mortgage free anyway.

In the meantime, you could take out your rage at the world around the iniquities of fixed interest contracts by kicking a cat or something...

phunk wrote:Ima gonna save a chunk of cash when my current fixed rate expires. Pity its a couple of months away..

We've always been too slack to get around to fixing part of the mortgage - always had floating. There was a short period where we paid more in interest when it spiked, but for a part of that we were mortgage free anyway.

In the meantime, you could take out your rage at the world around the iniquities of fixed interest contracts by kicking a cat or something...

But I fixed knowing full well the consequences of what I was doing so feel no rage at all, in fact my net position is probably still positive as the floating rate was quite high at the time, and I only fixed for a year knowing that rates would come down by the time the contract finished. I did not count on a complete economic collapse though..

phunk wrote:But I fixed knowing full well the consequences of what I was doing so feel no rage at all, in fact my net position is probably still positive as the floating rate was quite high at the time, and I only fixed for a year knowing that rates would come down by the time the contract finished. I did not count on a complete economic collapse though..

In that case you could always kick the neighbours cat and build up a buffer in case something annoying happens in the near future.